May 4, 2017

KP Tissue Releases First Quarter 2017 Financial Results

Business Expansion continues

MISSISSAUGA, ONTARIO--(Marketwired - May 4, 2017) - KP Tissue Inc. (KPT) (TSX:KPT) reports the Q1 2017 financial and operational results of KPT and Kruger Products L.P. (KPLP). Kruger Products is Canada's leading manufacturer of quality tissue products for the Consumer market (Cashmere, Purex, SpongeTowels, Scotties, and White Swan) and the Away-From-Home market, and continues to grow in the U.S. Consumer tissue business with the White Cloud(R) brand and premium private label products. KPT currently holds a 16.1% interest in KPLP.

KPLP Q1 2017 Business and Financial Highlights




--  Revenue increased by 3.4% to $289.3 million in Q1 2017 compared to Q1

    2016

--  Adjusted EBITDA was $33.8 million in Q1 2017 compared to $28.1 million

    in Q1 2016, up 20.3%

--  Achieved Adjusted EBITDA from TAD products of $15.7 million

--  Expanded distribution of White Cloudr to select U.S. retailers

--  Declared a quarterly dividend of $0.18 per share to be paid on July 17,

    2017



"We are pleased by our Adjusted EBITDA of $33.8 million for the first quarter of 2017, which was mainly driven by the higher contribution from TAD products, despite some headwinds from higher fibre prices," said Mario Gosselin, CEO of KP Tissue and KPLP.

"The commercialization of our TAD products is entering its fifth year and we are extremely pleased by the overall performance. For the first quarter, Adjusted EBITDA related to TAD products reached $15.7 million, representing an annualized run rate in excess of our previously stated expectation of $60 million for the TAD project. We now have TAD fully integrated into our business and are proud of the results we have achieved.

"While we anticipate higher pulp prices to negatively impact results in the near-term, Adjusted EBITDA for Q2 2017 is expected to increase slightly over Q2 2016. For the remainder of 2017, we look forward to the start-up of our new paper machine in Crabtree, improved performance from the Away-from-Home business and expanded distribution of the White Cloud(R) brand to select U.S. retailers," concluded Mr. Gosselin.

KPLP Q1 2017 Financial Results

Revenue in Q1 2017 was $289.3 million, compared to $279.7 million in Q1 2016, an increase of $9.6 million or 3.4%. The increase in revenue was primarily due to higher sales volume and favourable selling price increase in Canada, partially offset by the unfavourable impact of foreign exchange on U.S. dollar sales.

Cost of sales in Q1 2017 increased to $244.3 million, compared to $240.6 million in Q1 2016, primarily due to higher sales volumes and an increase in USD pulp prices, partially offset by the favourable impact of foreign exchange, cost reduction initiatives and the impact of capital projects. As a percentage of revenue, cost of sales were 84.4% in Q1 2017 compared to 86.0% in Q1 2016.

Selling, general and administrative (SG&A) expenses in Q1 2017 were $23.2 million, compared to $21.7 million in Q1 2016. The increase was primarily due to slightly higher advertising and promotion expenses, and slightly higher selling expenses related to higher sales volume, partially offset by the favourable impact of foreign exchange. As a percentage of revenue, SG&A expenses were 8.0% in Q1 2017, compared to 7.8% in Q1 2016.

Adjusted EBITDA in Q1 2017 was $33.8 million, compared to $28.1 million in Q1 2016, primarily due to higher sales volume, improved selling prices in Canada, the net positive impact of foreign exchange and the impact of cost reduction initiatives and capital projects, partially offset by higher commodity costs and SG&A costs. Adjusted EBITDA attributable to the sale of TAD products was $15.7 million in Q1 2017 compared to $10.5 million in Q1 2016.

Net income in Q1 2017 was $6.9 million, compared to $6.4 million in Q1 2016, primarily due to higher Adjusted EBITDA of $5.7 million and a decrease in interest expense of $0.9 million. These increases were partially offset by an increase in tax expense of $2.1 million, higher depreciation expense of $1.6 million, an increase in the change in amortized cost of Partnership units liability of $1.3 million, and a change in the foreign exchange gain of $1.1 million.

Total liquidity, representing cash and cash equivalents and availability under the credit line within covenant limitations, was $88.6 million as of March 26, 2017, compared to $103.5 million as of December 31, 2016.

KPT Q1 2017 Financial Results

KPT incurred a net loss of $0.6 million in Q1 2017. Included in the net loss was $1.1 million representing KPT's share of KPLP's income. The income was reduced by depreciation expense of $1.5 million related to adjustments to carrying amounts on acquisition and income tax expense of $0.2 million.

Dividends on Common Shares

The Board of Directors of KPT declared a quarterly dividend of $0.18 per share to be paid on July 17, 2017 to shareholders of record at the close of business on June 30, 2017.

Additional Information

For additional information please refer to Management's Discussion and Analysis (MD&A) of KPT and KPLP for the first quarter ended March 26, 2017 available on SEDAR at www.sedar.com or our website at www.kptissueinc.com.

First Quarter Results Conference Call Information

KPT will hold its first quarter conference call on Thursday, May 4, 2017 at 8:30 a.m. Eastern Time.

Via telephone: 1-877-223-4471 or 647-788-4922

Via the internet at: www.kptissueinc.com

Presentation material referenced during the conference call will be available at www.kptissueinc.com.

A rebroadcast of the conference call will be available until midnight, June 5, 2017 by dialing 800-585-8367 or 416-621-4642 and entering passcode 5982186.

The replay of the webcast will remain available on the website until midnight, June 5, 2017.

About KP Tissue Inc. (KPT)

KPT was created to acquire, and its business is limited to holding, a limited partnership interest in KPLP, which is accounted for as an investment on the equity basis. KPT currently holds a 16.1% interest in KPLP. For more information visit www.kptissueinc.com.

About Kruger Products L.P. (KPLP)

KPLP is Canada's leading manufacturer of quality tissue products for household, industrial and commercial use. KPLP serves the Canadian consumer market with such well-known brands as Cashmere(R), Purex(R), SpongeTowels(R), Scotties(R) and White Swan(R). In the U.S., KPLP manufactures the White Cloud(R) brand, as well as many private label products. The Away-From-Home division manufactures and distributes high-quality, cost-effective product solutions to a wide range of commercial and public entities. KPLP has approximately 2,500 employees and operates eight FSC(R) COC-certified (FSC(R) C-104904) production facilities in North America. For more information visit www.krugerproducts.ca .

Non-IFRS Measures

This press release uses certain non-IFRS financial measures which KPLP believes provide useful information to management of KPLP and the readers of the financial information in measuring the financial performance and financial condition of KPLP. These measures do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similarly titled measures presented by other companies. An example of such a measure is Adjusted EBITDA. Beginning with Q4 2015 in accordance with Canadian Securities Administrators Staff Notice 52-306 (Revised), we reference Adjusted EBITDA as a non-IFRS financial measure. This term replaces the previously referenced non-IFRS financial measure EBITDA. Our definition of Adjusted EBITDA is unchanged from our former definition of EBITDA. Accordingly, this change in terminology has no impact on our reported financial results for prior periods. Adjusted EBITDA is not a measurement of operating performance computed in accordance with IFRS and should not be considered as a substitute for operating income, net income or cash flows from operating activities computed in accordance with IFRS. "Adjusted EBITDA" is calculated by KPLP as net income (loss) before (i) interest expense, (ii) income taxes, (iii) depreciation, (iv) amortization, (v) impairment (gain on sale) of non-financial assets, (vi) loss (gain) on disposal of property, plant and equipment, (vii) foreign exchange loss (gain), (viii) costs related to restructuring activities, (ix) changes in amortized cost of Partnership units liability, and (x) one-time costs due to pension revaluations related to past service. A reconciliation of Adjusted EBITDA to the relevant reported results can be found in the MD&A of KPT and KPLP for the first quarter ended March 26, 2017 available on SEDAR at www.sedar.com.

Forward-Looking Statements

Certain statements in this press release about KPT's and KPLP's current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements. The forward-looking information is based on certain key expectations and assumptions made by KPT, including expectations and assumptions concerning: the impact of the TAD Project on Adjusted EBITDA; the expectation of continued growth in sales of TAD products in the U.S.; a successful start-up of the Crabtree paper machine in Q4 2017; improved performance of the Away-From-Home business; and expanded distribution of White Cloud to select U.S. retailers. Although KPT believes that the expectations and assumptions on which such forward-looking information is based are reasonable, undue reliance should not be placed on the forward-looking information since no assurance can be given that such expectations and assumptions will prove to be correct.

The outlook provided in respect of Adjusted EBITDA for Q2 2017 is forward-looking information and is subject to the risk and uncertainties referred to below. The purpose of the outlook is to provide the reader with an indication of management's expectations, at the date of this press release, regarding KPLP's future financial performance. Readers are cautioned that this information may not be appropriate for other purposes.

Many factors could cause KPLP's actual results, level of activity, performance or achievements or future events or developments (which could in turn affect the economic benefits derived from the Corporation's economic interest in KPLP) to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors, which are discussed in greater detail in the "Risk Factors - Risks Related to KPLP's Business" section of the KPT Annual Information Form dated March 9, 2017 available on SEDAR at www.sedar.com: Kruger Inc.'s influence over KPLP; KPLP's reliance on Kruger Inc.; consequences of an event of insolvency relating to Kruger Inc.; risks associated with the TAD Project; operational risks; Gatineau Plant land lease; significant increases in input costs; reduction in supply of fibre; increased pricing pressure and intense competition; KPLP's inability to innovate effectively; adverse economic conditions; dependence on key retail trade customers; damage to the reputation of KPLP or KPLP's brands; KPLP's sales being less than anticipated; KPLP's failure to implement its business and operating strategies; KPLP's obligation to make regular capital expenditures; KPLP's entering into unsuccessful acquisitions; KPLP's dependence on key personnel; KPLP's inability to retain its existing customers or obtain new customers; KPLP's loss of key suppliers; KPLP's failure to adequately protect its intellectual property rights; KPLP's reliance on third party intellectual property licenses; adverse litigation and other claims affecting KPLP; material expenditures due to comprehensive environmental regulation affecting KPLP's cash flow; KPLP's pension obligations are significant and can be materially higher than predicted if KPLP Management's underlying assumptions are incorrect; labour disputes adversely affecting KPLP's cost structure and KPLP's ability to run its plants; exchange rate and U.S. competitors; KPLP's inability to service all of its indebtedness; exposure to potential consumer product liability, restrictive covenants; interest rate and refinancing risk; information technology; cyber-security; insurance; internal controls; and trade related risk.

Readers should not place undue reliance on forward-looking statements made herein. The forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The forward-looking information contained herein is made as of the date of press release and KPT undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.




                            Kruger Products L.P.

      Unaudited Condensed Consolidated Statement of Financial Position

                       (thousands of Canadian dollars)





                                          March 26, 2017  December 31, 2016

                                                       $                  $

                                      --------------------------------------

Assets

Current assets

  Cash and cash equivalents                       34,844             36,511

  Trade and other receivables                    113,536            123,095

  Receivables from related parties                   518                185

  Current portion of advances to

   partners                                          439              5,465

  Inventories                                    181,572            179,543

  Income tax recoverable                              45                423

  Prepaid expenses                                12,927              7,286

                                      --------------------------------------

                                                 343,881            352,508

Non-current assets

  Property, plant & equipment                    769,586            762,270

  Other long-term assets                           5,945              6,075

  Goodwill                                       160,939            160,939

  Intangible assets                               15,030             15,270

  Deferred income taxes                           37,188             39,913

                                      --------------------------------------

Total assets                                   1,332,569          1,336,975

                                      --------------------------------------

                                      --------------------------------------



Liabilities

Current liabilities

  Bank indebtedness                                    -              9,007

  Trade and other payables                       183,426            201,477

  Payables to related parties                      4,578              3,606

  Income tax payable                                 766              1,779

  Distributions payable                           10,203             10,148

  Current portion of provisions                    1,604              1,885

  Current portion of long-term debt                8,828              8,859

                                      --------------------------------------

                                                 209,405            236,761

Non-current liabilities

  Long-term debt                                 443,471            415,379

  Provisions                                       6,730              6,487

  Pensions                                        94,953             92,646

  Post-retirement benefits                        58,307             57,162

                                      --------------------------------------

  Liabilities to non-unitholders                 812,866            808,435

  Current portion of Partnership units

   liability                                       8,611              8,611

  Long-term portion of Partnership

   units liability                               131,214            137,296

                                      --------------------------------------

  Total Partnership units liability              139,825            145,907

                                      --------------------------------------

Total liabilities                                952,691            954,342

                                      --------------------------------------



Equity

  Partnership units                              341,406            336,576

  Deficit                                        (49,612)           (42,792)

  Accumulated other comprehensive

   income                                         88,084             88,849

                                      --------------------------------------

Total equity                                     379,878            382,633

                                      --------------------------------------

Total equity and liabilities                   1,332,569          1,336,975

                                      --------------------------------------

                                      --------------------------------------





                            Kruger Products L.P.

 Unaudited Condensed Consolidated Statement of Comprehensive Income (Loss)

                      (thousands of Canadian dollars)





                                                 3-month            3-month

                                            period ended       period ended

                                          March 26, 2017     March 27, 2016

                                                       $                  $

                                      --------------------------------------



Revenue                                          289,271            279,690



Expenses

  Cost of sales                                  244,254            240,647

  Selling, general and administrative

   expenses                                       23,221             21,652

  Loss on sale of non-financial assets                13                  -

  Restructuring costs, net                            11                  -

                                      --------------------------------------



Operating income                                  21,772             17,391



  Interest expense                                10,264             11,214

  Other (income) expense                           1,945               (829)

                                      --------------------------------------



Income before income taxes                         9,563              7,006



Income taxes                                       2,614                616

                                      --------------------------------------



Net income for the period                          6,949              6,390

                                      --------------------------------------



Other comprehensive loss

  Items that will not be reclassified

   to net income:

  Remeasurements of pensions                      (2,567)           (16,769)

  Remeasurements of post-retirement

   benefits                                         (884)               121

  Items that may be subsequently

   reclassified to net income:

  Available-for-sale investment                        -               (290)

  Cumulative translation adjustment                 (765)           (13,981)

                                      --------------------------------------



Total other comprehensive loss for the

 period                                           (4,216)           (30,919)

                                      --------------------------------------



Comprehensive income (loss) for the

 period                                            2,733            (24,529)

                                      --------------------------------------

                                      --------------------------------------







                            Kruger Products L.P.

          Unaudited Condensed Consolidated Statement of Cash Flows

                      (thousands of Canadian dollars)





                                                 3-month            3-month

                                            period ended       period ended

                                           March 26 2017     March 27, 2016

                                                       $                  $

                                      --------------------------------------

Cash flows from (used in) operating

 activities

Net income for the period                          6,949              6,390

Items not affecting cash

  Depreciation                                    11,748             10,087

  Amortization                                       240                284

  Loss (gain) on sale of property,

   plant and equipment                                (2)                 1

  Change in amortized cost of

   Partnership units liability                     2,529              1,234

  Gain on sale of investment                           -               (324)

  Foreign exchange gain                             (584)            (1,739)

  Interest expense                                10,264             11,214

  Pension and post retirement benefits             2,513              2,659

  Provisions                                         244                141

  Income taxes                                     2,614                616

  Loss on sale of non-financial assets                13                  -

                                      --------------------------------------

  Total items not affecting cash                  29,579             24,173



Net change in non-cash working capital           (28,860)           (16,639)

Contributions to pension and post-

 retirement benefit plans                         (3,738)            (5,843)

Provisions paid                                     (334)              (476)

Income tax payments                               (1,507)              (865)

                                      --------------------------------------



Net cash from operating activities                 2,089              6,740

                                      --------------------------------------



Cash flows from (used in) investing

 activities

Purchases of property, plant &

 equipment                                       (12,734)           (16,189)

Capitalized interest paid                           (222)                 -

Proceeds on sale of investment                         -              1,439

Government assistance received                       916              1,209

Purchases of software                                  -                (69)

Proceeds on sale of property, plant

 and equipment                                     1,043                  -

                                      --------------------------------------



Net cash used in investing activities            (10,997)           (13,610)

                                      --------------------------------------



Cash flows from (used in) financing

 activities

Proceeds from long-term debt                      28,015                791

Repayment of long-term debt                         (126)            (7,204)

Payment of deferred financing fees                    (9)              (330)

Interest paid on long-term debt                   (2,558)            (1,019)

Distributions and advances paid, net              (9,018)            (6,547)

                                      --------------------------------------



Net cash from (used in) financing

 activities                                       16,304            (14,309)

                                      --------------------------------------





Effect of exchange rate changes on

 cash and cash equivalents held in

 foreign currency                                    (56)              (296)

                                      --------------------------------------



Increase (decrease) in cash and cash

 equivalents during the period                     7,340            (21,475)



Cash and cash equivalents - Beginning

 of period                                        27,504             25,455

                                      --------------------------------------



Cash and cash equivalents - End of

 period                                           34,844              3,980

                                      --------------------------------------

                                      --------------------------------------







                            Kruger Products L.P.

                       Segment and Geographic Results

                      (thousands of Canadian dollars)



                                                 3-month            3-month

                                            period ended       period ended

                                          March 26, 2017     March 27, 2016

                                                       $                  $

                                      --------------------------------------



Segment Information



Segment Revenue

  Consumer                                       238,927            228,151

  AFH                                             48,674             49,052

  Other                                            1,670              2,487

                                      --------------------------------------



Total segment revenue                            289,271            279,690

                                      --------------------------------------

                                      --------------------------------------



Segment Adjusted EBITDA

  Consumer                                        32,972             27,807

  AFH                                                655                 30

  Other                                              155                250

                                      --------------------------------------



Total segment Adjusted EBITDA                     33,782             28,087



Reconciliation to Net Income:



Depreciation and amortization                     11,988             10,371

Interest expense                                  10,264             11,214

Change in amortized cost of

 Partnership units liability                       2,529              1,234

Loss (gain) on sale of property, plant

 and equipment                                        (2)                 1

Loss on sale of non-financial assets                  13                  -

Restructuring costs                                   11                  -

Foreign exchange gain                               (584)            (1,739)

                                      --------------------------------------



Income before income taxes                         9,563              7,006



Income taxes                                       2,614                616

                                      --------------------------------------



Net income                                         6,949              6,390

                                      --------------------------------------

                                      --------------------------------------



Geographic Revenue



Canada                                           173,877            163,772

U.S.                                             104,649            103,786

Mexico                                            10,745             12,132

                                      --------------------------------------



Total revenue                                    289,271            279,690

                                      --------------------------------------

                                      --------------------------------------







                               KP Tissue Inc.

            Unaudited Condensed Statement of Financial Position

                      (thousands of Canadian dollars)





                                          March 26, 2017  December 31, 2016

                                                       $                  $

                                      --------------------------------------

Assets



Current assets

  Distributions receivable                         1,642              1,636

  Receivable from Partnership                          -                426

  Income tax recoverable                             303                  -

                                      --------------------------------------

                                                   1,945              2,062



Non-current assets

  Investment in associate                        113,706            117,349

                                      --------------------------------------



Total Assets                                     115,651            119,411

                                      --------------------------------------

                                      --------------------------------------



Liabilities



Current liabilities

  Dividend payable                                 1,642              1,636

  Payable to Partnership                             271                  -

  Current portion of advances from

   Partnership                                        71                914

  Income tax payable                                   -                884

                                      --------------------------------------

                                                   1,984              3,434

Non-current liabilities

  Deferred income taxes                              944                893

                                      --------------------------------------



Total liabilities                                  2,928              4,327

                                      --------------------------------------



Equity



  Common shares                                   13,647             13,176

  Contributed surplus                            144,819            144,819

  Deficit                                        (61,389)           (58,729)

  Accumulated other comprehensive

   income                                         15,646             15,818

                                      --------------------------------------



Total equity                                     112,723            115,084

                                      --------------------------------------



Total liabilities and equity                     115,651            119,411

                                      --------------------------------------

                                      --------------------------------------





                               KP Tissue Inc.

            Unaudited Condensed Statement of Comprehensive Loss

    (thousands of Canadian dollars, except share and per share amounts)



                                                3-month             3-month

                                           period ended        period ended

                                         March 26, 2017      March 27, 2016

                                                      $                   $

                                     ---------------------------------------



Equity loss                                        (363)               (378)



Dilution gain (loss)                                 50                (171)

                                     ---------------------------------------



Loss before income taxes                           (313)               (549)



Income taxes                                        248                 929

                                     ---------------------------------------



Net loss for the period                            (561)             (1,478)

                                     ---------------------------------------





Other comprehensive income (loss)net

 of tax expense (recovery)

  Items that will not be reclassified

   to net loss:

  Remeasurements of pensions                       (359)             (2,380)

  Remeasurements of post-retirement

   benefits                                         (87)                 12

  Items that may be subsequently

   reclassified to net loss:

  Available-for-sale investment                       -                 (41)

  Cumulative translation adjustment                (172)             (2,531)

                                     ---------------------------------------



Total other comprehensive loss for

 the period                                        (618)             (4,940)

                                     ---------------------------------------



Comprehensive loss for the period                (1,179)             (6,418)

                                     ---------------------------------------

                                     ---------------------------------------



Basic loss per share                              (0.06)              (0.16)

                                     ---------------------------------------

                                     ---------------------------------------



Weighted average number of shares

 outstanding                                  9,116,437           8,993,554

                                     ---------------------------------------

                                     ---------------------------------------





                               KP Tissue Inc.

                Unaudited Condensed Statement of Cash Flows

                      (thousands of Canadian dollars)



                                                 3-month            3-month

                                            period ended       period ended

                                          March 26, 2017     March 27, 2016

                                                       $                  $

                                      --------------------------------------

Cash flows from (used in) operating

 activities

Net loss for the period                             (561)            (1,478)

Items not affecting cash

  Equity loss                                        363                378

  Dilution (gain) loss                               (50)               171

  Income taxes                                       248                929

                                      --------------------------------------

  Total items not affecting cash                     561              1,478



Net change in non-cash working capital               697                  -

Tax payments                                      (1,249)              (205)

Tax Distribution received                            481                  -

Advances received                                     71                205

                                      --------------------------------------



Net cash from (used in) operating

 activities                                            -                  -

                                      --------------------------------------



Cash flows from investing activites

Partnership unit distributions

 received                                          1,176              1,613

                                      --------------------------------------



Net cash from investing activities                 1,176              1,613

                                      --------------------------------------



Cash flows used in financing

 activities

Dividends paid                                    (1,176)            (1,613)

                                      --------------------------------------



Net cash used in financing activities             (1,176)            (1,613)

                                      --------------------------------------



Increase (decrease) in cash and cash

 equivalents during the period                         -                  -



Cash and cash equivalents - Beginning

 of period                                             -                  -

                                      --------------------------------------



Cash and cash equivalents - End of

 period                                                -                  -

                                      --------------------------------------

                                      --------------------------------------







FOR FURTHER INFORMATION PLEASE CONTACT:

INFORMATION:

Francois Paroyan

General Counsel and Corporate Secretary

KP Tissue Inc.

905.812.6936

francois.paroyan@krugerproducts.ca





INVESTORS:


Mike Baldesarra

Director of Investor Relations

KP Tissue Inc.

905.812.6962

IR@KPTissueinc.com









Source: KP Tissue Inc.

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